Airlines mull overbooking payments

Calculated risk: Jet Airways has been asked to pay compensation to a passenger who was denied a boarding pass due to overbooking.

Updated: Mon, Dec 24 2007. 12 57 AM IST

Mumbai: Full-service airlines in India, such as Jet Airways, Kingfisher Airlines and Air India, are considering a “denied boarding compensation” to passengers who are not allow-ed to travel despite holding co-nfirmed tickets. This happens when airlines book more passengers than available seats.

The move follows a recent judgement by the Consumer Disputes Redressal Commission (CDRC) of Maharashtra, a quasi-judicial body. The commission asked Jet Airways (India) Ltd to pay compensation to a passenger who was denied a boarding pass due to overbooking. The commission did not find fault with Jet Airways’ overbooking as it is an international business practice, but said the airline (Jet) should also follow international standards of paying “denied boarding compensation” to a victim of overbooking.

“We are looking at the concept of giving such compensation. The modalities of this compensation are yet to be finalized,” said a senior Jet executive who didn’t want to be named. Kingfisher and Air India executives said they, too, are considering such a move.

Calculated risk: Jet Airways has been asked to pay compensation to a passenger who was denied a boarding pass due to overbooking.

Except low-fare carriers, all airlines overbook passengers. While international carriers follow the practice of giving such compensation in their domestic and international sectors, Indian carriers restrict them to just the international leg. Low-fare carriers don’t overbook since there is no provision for cancellation of tickets or of claiming refunds.

An aviation analyst with a foreign brokerage estimates that Indian carriers overbook around 5% in the domestic sectors and 3% on the international sectors, based on historic data of no-shows of passengers.?He?didn’t want to be identified as he is not authorized to be quoted by the media.

International carriers usually pay a denied boarding compensation of $300-400 (Rs11,880-15,840), depending on the routes, apart from accommodation until the next available flight.

This issue came into the limelight recently when a TV news channel CNN-IBN, citing four instances, alleged that the largest?low-fare?carrier, Deccan (former Air Deccan) had deliberately overbooked flights to increase revenues in January.

Air Deccan refuted the allegations by clarifying that Deccan’s reservation system can’t overbook as the system is designed to issue tickets only for available seats. The “overbooking” happened when the airline was changing its reservation software, the then managing director of the airline, G.R. Gopinath, had clarified.

SpiceJet Ltd chief commercial officer Samyukth Sridharan added: “Low-fare carriers do not overbook as the systems are not designed for that.” Low-fare carriers in India include Deccan, SpiceJet, IndiGo and GoAir.

“Since seats are a perishable commodity, airlines will book to an extent up to the number of expected no-show by passengers,” said Jitender Bhargava, Air India’s executive director for communications.

“It would cost an airline more than $400 to arrange hotel accommodation and food for an overbooking victim. Therefore, it is a close call taken between keeping a few seats vacant or overbooking to a certain percentage,” said a senior Air India executive, who did not want to be identified.

“Overbooking may be a business strategy for an airline. But it creates trauma for passengers who are denied boarding. Arranging an accommodation in five-star hotels is not a solution,” said Edward Kennedy, who was an overbooking victim of Gulf Air.

Kennedy, who works with a multinational oil firm in Saudi Arabia, was supposed to take a 7am Gulf Air flight on 19 December. Due to overbooking, he and his friends could only take the next day’s 12.15am flight, thereby wasting a day.

CDRC’s judgement relates to a case involving Dhiren N. Sheth of Mumbai, who had booked a Jet Airways ticket for Ahmedabad on 23 December 2002. The order says he reached the airport in time, but was not given a boarding pass, due to over booking. Mint couldn’t independently verify this as it could not contact Sheth, who later filed an appeal with the south Mumbai district consumer forum.

The forum passed a judgement in his favour and held the airline not guilty of unfair trade practice, while asking them to pay a penalty of Rs12,275. However, CDRC supported the contention of Jet Airways and passed an order stating that overbooking is “an international business practice recognized worldwide and it is not an unfair trade practice.”